Whirlpool India, owned 75% by the $19bn US based home appliances giant, Whirlpool Corporation, is a consumer centric innovative company with differentiated product offerings through a 360 degree approach in creating brand visibility in home appliances.
Investment Argument
Whirlpool India with over 2,500 employees across 3 state-of-the-
Rapid urbanisation and growth in per capita income would in our view drive growth in the consumer durable segment. Although we expect washing machines to remain an urban centric product, we expect the volume mix to shift towards the fully automatic models and its share to rise significantly.
We however, expect the addressable market size of refrigerators to increase going forward and the mix to shift towards the high end frost-free segment which would aid the growth of Whirlpool in India.
Whirlpool is best placed to expand its footprint aided by modern trade given its brand equity, ROE of 44%, ROCE of 49% and vast distribution strengths. Whirlpool India has no comparable peer in India and would in our view trade at a premium to its parent which operates in highly matured consumer durables markets.
Valuations
We expect Whirlpool to grow its net profits at a CAGR of 31% over the next two years on the back of an expected 22.8% CAGR growth in revenues.
We initiate coverage on Whirlpool of India, trading at 12.9xFY'12E earnings of Rs 20.3 with a BUY rating and have a one-year price target of Rs356 on the stock which offers an upside potential of 36%.
Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints. Nothing in this article is, or should be construed as, investment advice. |
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